Wednesday, April 24, 2013

Markets and Elections

Globally, elections are key events and are followed minutely bu investors and market participants. Markets always hope for stable and progressive governments. As the general election near, there is a period of nervousness in the markets. In India, the upcoming general elections are scheduled in May 2014. As the current year is a pre-election year, all the political developments are tracked closely by the market participants.
During most of the pre-election years, equity markets have traded flat with positive bias, except for the year 1998, when the markets traded flat with negative bias as there was extreme uncertain political environment due to unstable government at the centre. Even in 2009 pre-election period had witnessed highly volatile markets with downward bias, though all the global markets witnessed turbulent meltdown due to the US sub prime crisis.
While the reforms are still to show any significant impact on the economic growth, as the election period nears, the pick up in the government spending should lead to revival in the economy.
Also as the political parties prepare for the elections, the election linked spending by the political parties and the spending by the election commission could also drive momentum in the econmoy.